3 Resolutions for Your DC Plan in 2026

Here are three strategic resolutions to consider for your DC plan in 2026.

1. Explore alternative investment options 

Following the August 2025 executive order on “Democratizing Access to Alternative Assets for 401(k) Investors,” plan sponsors can now expect to have clearer guidance on incorporating private markets into their investment lineups. The preliminary DOL guidance expected in February 2026 should provide additional clarity on fiduciary processes for offering alternatives.

Why consider alternatives? The case is compelling: 94% of investors globally feel they are underexposed to private markets and need to catch up.¹ Many defined benefit plans have successfully used private real estate, private credit, and private equity to deliver better outcomes. These strategies offer the potential for higher returns, broader diversification across growing companies that remain private, and alignment with the long-term nature of retirement savings.

The key is understanding that alternatives should be delivered through diversified, professionally managed vehicles: think target date funds (TDFs), custom solutions, or white label funds— not as standalone options. For example, 36% of consultants and advisors said they are very or somewhat likely to present an off-the-shelf TDF product with private market investments to their DC plan sponsor clients in the next 12 months.² 

Successfully implementing alternatives requires navigating liquidity considerations, daily valuations, fee sensitivity, and ongoing regulatory developments. Look for investment managers who understand these complexities and offer flexibility around liquidity management and participant-sensitive distributions.

2. Reevaluate your QDIA 

While 94% of plans use a TDF as their qualified default investment alternative (QDIA),³ there’s an important nuance many sponsors overlook: there’s no such thing as a truly “passive” TDF. Even passive TDFs require multiple active decisions around glide path construction, asset allocation, and landing points, all of which can lead to wide variation in outcomes. 

Recent litigation has reinforced this point. Federal courts have consistently dismissed cases based solely on fund underperformance, including suits against passive TDFs. The takeaway: Simply selecting a passive option doesn’t provide litigation protection. What matters is having a documented process for selection and monitoring.

This is where blended TDFs merit attention. By combining active strategies in less efficient asset classes like fixed income (where active management historically succeeds at higher rates) with passive strategies in efficient markets like U.S. large cap equity, blended TDFs offer broader diversification at reasonable costs. The fee difference between blended and passive TDFs is moderate, yet asset allocation decisions can impact long-term outcomes by 4% annually or more. 

Blended TDFs also typically include more than twice as many asset classes as passive alternatives, providing tactical allocation capabilities and better alignment with how most plans structure their core menus—95% of which include both active and passive options.

3. Embrace collective investment trusts 

Collective investment trusts (CITs) have officially arrived, surpassing mutual funds as the investment vehicle of choice in TDFs in 2024 with about 47% of market share. Overall, 96% of DC plans now use CITs in their investment menus.⁴ 

What’s driving their popularity? Cost efficiency. CIT fees are often lower than mutual fund fees due to reduced overhead—savings that can be passed directly to participants. But CITs offer more than just cost advantages. They provide flexibility with multiple share classes, access to asset classes typically unavailable in mutual funds (including alternatives), and increasingly, the same reporting quality and educational materials that mutual funds provide. 

Implementation has become straightforward too, with NSCC trading capabilities and setup processes comparable to mutual funds. While 403(b) plans aren’t yet eligible despite SECURE 2.0’s provisions, CITs represent a clear opportunity for 401(k) sponsors to fulfill their fiduciary duty to review fees for reasonableness. 

Remember: Your duty as a fiduciary isn’t to select the cheapest option available, but to document a thoughtful process around investment selection. CITs simply make that process easier by offering competitive pricing alongside institutional-quality investment management.

These three resolutions share a common theme: they’re not radical departures from what you may already be doing in your DC plan; they’re strategic refinements that leverage evolving regulations, court guidance, and market innovations. By exploring alternatives, reevaluating your QDIA with fresh eyes, and embracing lower-cost investment vehicles, you’re building on proven foundations to help deliver better outcomes for participants in 2026 and beyond.

A note about risk: There is no guarantee that any investment option will achieve its stated objective. Principal value fluctuates and there is no guarantee of value at any time, including the target date. The “target date” is the approximate date when an investor plans to start withdrawing their money. When their target date is reached, they may have more or less than the original amount invested. Stocks are more volatile than bonds, and portfolios with a higher concentration of stocks are more likely to experience greater fluctuations in value than portfolios with a higher concentration in bonds. Foreign stocks and small- and mid-cap stocks may be more volatile than large-cap stocks. Investing in bonds also, entails credit risk and interest rate risk. Generally, investors with longer timeframes can consider assuming more risk in their investment portfolio.